Amazon offers individuals and businesses the ability to create their own online store and sell products through the Amazon marketplace. There are different selling plans available, with varying fees and features. So is it free to create an Amazon store? The short answer is no – there are costs involved with selling on Amazon. However, the specific fees depend on the selling plan you choose.
Amazon Selling Plans
There are three main selling plans offered by Amazon:
Individual Plan
The Amazon Individual plan is designed for small volume sellers, such as someone selling items from their home. This plan has a monthly fee of $0.99 plus selling fees per item sold. Selling fees are $0.99 per item sold plus a referral fee which varies by product category.
So with the Individual plan, it is not free to create a store, since you have to pay the $0.99 monthly fee. However, the overall costs are relatively low if you are selling smaller volumes.
Professional Plan
The Professional plan is intended for higher volume sellers. There is a $39.99 monthly fee for this plan. The referral and selling fees per item are the same as the Individual plan.
Additional features include access to bulk listing tools, order reports, and access to Amazon’s inventory placement services. So again, this plan is not free, but provides more features for larger sellers.
Business Plan
Amazon’s Business plan has the highest monthly fee at $79.99 per month. It is designed for established retailers and brands selling large volumes on Amazon.
The Business plan has the same referral and selling fees per item as the other two plans. Added benefits include quantity pricing tools, Amazon’s tax calculation service, and access to promotion tools.
So the Business plan is not free either. However it offers the most advanced tools and services for major brands and retailers selling on Amazon.
Common Fees For Selling on Amazon
While the monthly fees for the different selling plans vary, there are some additional common fees incurred when selling on Amazon:
Referral Fees
The referral fee is a percentage charged on the total sales price of an item. This ranges from 6-25% depending on the product category. For example books have a 15% referral fee, while jewelry is 20%. The fees are deducted from the seller’s payments.
Fulfillment Fees
If you use Amazon’s Fulfillment by Amazon (FBA) service, there are fulfillment fees charged per item. These include fees for picking, packing, shipping, and customer service. FBA fees vary by item size and weight.
Storage Fees
Amazon charges monthly storage fees for inventory stored in their fulfillment centers. The fee is based on volume size of items stored. During peak holiday seasons, additional long term storage fees may apply.
Optional Services
Other optional services like ads, promoted listings, branded packaging, etc can incur additional fees. Sellers should factor these in when evaluating the overall cost of selling on Amazon.
Other Potential Costs
In addition to Amazon’s own fees, here are some other potential costs to factor in:
Professional Selling Account
To sell more than 40 items per month on Amazon, you need a Professional Selling Account. This account costs $39.99 per month – it is included in the Professional and Business seller plans.
Barcode Fees
You may need to purchase barcodes or UPC codes for the items you list on Amazon. These cost around $0 to $2 per code from third party providers.
Packing & Shipping
If you choose to self-fulfill orders instead of using FBA, you take on the costs of shipping supplies, postage and labor. These costs can add up quickly at higher sales volumes.
Tax Calculation & Remittance
Sellers are responsible for calculating sales tax and remitting it to the appropriate states. There are charges involved with using Amazon’s automated tax tools.
Advertising & Marketing
Optional advertising and marketing programs like Amazon PPC ads, coupons and product giveaways involve additional costs.
Returns & Refunds
Managing product returns and providing refunds will create costs for sellers. Make sure to factor this into your budget.
Ways To Reduce Costs on Amazon
While selling on Amazon does require fees and costs, here are some tips to keep your expenses as low as possible:
– Carefully select which selling plan meets your needs to avoid unnecessary monthly fees. Start with the Individual plan if selling fewer than 40 items per month.
– Only sign up for optional programs like FBA, ads or promotion tools once your sales volume justifies the extra costs.
– Pack orders yourself instead of using FBA if your item size and volume is low. This avoids fulfillment fees.
– Minimize storage fees by requesting removal of inventory from FBA centers during slow sales months.
– Use Amazon’s partnership with USPS to get low cost shipping rates if fulfilling orders yourself.
– Buy postage, shipping supplies, and packaging in bulk to lower those material costs.
– Use repricer tools to stay competitive on pricing – this helps boost sales volume to offset selling fees.
– Negotiate with suppliers for lower unit costs. This creates more profit margin to absorb Amazon’s fees.
Is an Amazon Store Worth the Cost?
Despite the various fees involved, creating an Amazon selling account can still be a profitable sales channel, especially if you:
– Select the right selling plan for your volume needs
– Employ tactics to minimize fees like shipping yourself when feasible
– Source low cost but high margin products to sell
– Use tools to optimize listings and boost sales
Amazon provides access to millions of customers around the world. The large sales volume potential often makes up for the fees required to sell there. Many sellers find that Amazon provides a major revenue stream even after paying Amazon’s commissions and costs.
Pros of Selling on Amazon
Here are some of the benefits that often outweigh the costs of an Amazon business:
Instant Access to Millions of Customers
Amazon’s vast customer base and high search volume is hard for any independent retailer to match. Increased sales volume provides revenue to offset the selling costs.
Trust in the Amazon Brand
Customers trust buying from Amazon, which translates to higher sales conversion rates for third-party sellers using the marketplace.
Fulfillment & Customer Support
Amazon handles fulfillment, shipping, and customer support for sellers using FBA. This convenience can be worth the FBA fees.
Exposure from Amazon Prime
Prime members who get fast, free shipping are more likely to purchase products Fulfilled by Amazon for convenience.
High Conversion International Sales
Amazon facilitates international sales in 100+ countries, with duties, taxes and customs managed for you. This gives access to an international customer base.
Marketing Tools & Reports
Amazon provides an array of PPC, advertising, and reporting tools to help sellers optimize listings and manage their business.
Cons of Selling on Amazon
The main tradeoffs and disadvantages to consider are:
Costs for Fulfillment & Advertising
Amazon FBA and advertising fees put a dent in profit margins, especially for new sellers without established sales volume.
Commissions on Each Sale
The referral fees take a percentage of all sales revenue. Some categories like books, jewelry and electronics have higher commissions.
Limited Control Over Branding
Sellers don’t have full control over product listings. Amazon’s catalog commingles listings, so branding individuality is challenging.
Account Suspension Risks
Strict Amazon rules mean sellers risk temporary or permanent suspension for issues like late shipping or poor customer experience.
Competitive Landscape
Amazon’s marketplace features competing sellers and pricing wars which can squeeze profit margins. Negotiating bulk discounts from suppliers is key.
Long Term Uncertainty
Amazon doesn’t guarantee access to its platform forever – major sellers have been banned before. So your business can disappear without much notice.
Conclusion
Selling on Amazon has an element of cost and risk like any business venture. However the potential benefits often make it a smart choice for many ecommerce entrepreneurs, especially those selling smaller, easy to ship products.
The key is understanding Amazon’s fee structure, choosing the right selling plan, employing tactics to minimize costs, and ensuring your profit margins remain healthy. With the right approach, the exposure and sales opportunities on Amazon are well worth the costs and commissions. Just make sure to thoroughly evaluate all aspects before jumping in.
